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Warner Bros. Discovery Lost $3.4 Billion in First Quarter as Combined Company

Combination of WarnerMedia and Discovery, Inc. whiffed badly on forecasts in Q2.

SUN VALLEY, IDAHO - JULY 05: David Zaslav, President and CEO of Warner Bros. Discovery talks to the media as he arrives at the Sun Valley Resort for the Allen & Company Sun Valley Conference on July 05, 2022 in Sun Valley, Idaho. The world's most wealthy and powerful businesspeople from the media, finance, and technology will converge at the Sun Valley Resort this week for the exclusive conference. (Photo by Kevin Dietsch/Getty Images)

SUN VALLEY, IDAHO – JULY 05: David Zaslav, President and CEO of Warner Bros. Discovery.

Getty Images

Warner Bros. Discovery had a Q2 to forget that no one is likely to forget: The newly combined company lost $3.4 billion in its first-ever quarter. Of course, that glaring total includes about $1 billion in restructuring (and “other” charges), another $1 billion in transaction and integration expenses, and $2 billion in the amortization of “intangibles.” In other news that isn’t news, mergers are expensive.

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), meanwhile, was a positive $1.66 billion. The real problem, and the reason stock dropped 12 percent in after-hours trading, is how badly Warner Bros. Discovery whiffed on media analysts’ consensus.

Wall Street forecast a Q2 loss per share of 3 cents on $11.84 billion in revenue. Warner Bros. Discovery reported a loss of $1.50 per share on revenue of $9.8 billion. Understandably, this was a truly tough quarter to estimate.

Warner Bros. Discovery’s studios and networks businesses both made money, but streaming did not. All told, HBO, HBO Max, and the Discovery portfolio now combine for 92.1 million subscribers, which is 1.7 million better than what they added up to at the end of Q1.

“We’ve had a busy, productive four months since launching Warner Bros. Discovery, and have more conviction than ever in the massive opportunity ahead,” David Zaslav said in a prepared statement accompanying his company’s financials. “We have the most powerful creative engine and bouquet of owned content in the world, as highlighted by our industry leading 193 Emmy nominations, and we intend to maximize the value of that content through a broad distribution model that includes theatrical, streaming, linear cable, free-to-air, gaming, consumer products and experiences, and more, everywhere in the world.”

“We’re confident we’re on the right path to meet our strategic goals and really excel, both creatively and financially, and couldn’t be more excited about the future of our company,” he continued.

Warner Bros. Discovery stock (WBD) closed Thursday at $17.46 per share. The merger of WarnerMedia and Discovery, Inc. into a new, singular company took place in early April.

Warner Bros. Discovery was having a wild week even before reporting earnings. On Tuesday it came out that “Batgirl” and “Scoob! Holiday Haunt” were being completely scrapped. Both movies were intended for HBO Max.

The “Batgirl” decision was a particularly shocking one. Warner Bros. Pictures Group already spent $90 million on the straight-to-streaming order. After the movie testing poorly with audiences, Zaslav decided he’d rather use it as a tax write off than an attempt to attract DC Comics fans to SVOD (subscriber video on-demand) service Max. (Pumping a ton more cash into reshoots and marketing to re-slate “Batgirl” for theaters was a nonstarter for Zaslav, who is almost singularly focused on cutting costs.)

Zaslav and his senior management team will host a conference call at 4:30 p.m. ET to discuss the quarter in greater detail.

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